Marketing Channels

Concept of marketing channels, their types

Most producers do not sell their goods directly to the final users, between them stand a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel. Marketing channels are sets of independent organization involved in the process of making a product or service available for use of consumption. They are set of pathways a product or service follows after production, culminating in purchase & use by the final end user.

1) Sole Selling Agent / Marketer : When a manufacturer prefers to stay out of the marketing & distribution task, he appoints a suitable agency as his sole selling agent. A sole selling agent is usually large marketing intermediary with large resources & extensive territory of operation. He will be having his own network of distributors / stockiest / wholesales & retailers. He takes care of most of the marketing & distribution functions on behalf of the manufacturer.

2) CFA’s : In many cases, manufacturer employ carrying & forwarding agents, often referred to as CFA‘s . The CFA‘s can be described as special category wholesalers. They, supply stocks on behalf of the manufacturer to the wholesale sector or the retail sector. Their function is distribution. Their distinguishing characteristics is that they do not resell products.

3) Wholesaler / Stockiest / Distributor : A wholesaler is also a large operator but not on a level comparable with a marketer or sole selling agent in size, resources & territory of operation. The wholesaler operates under the marketer sole selling agent. A wholesalers buys the product in large quantities & resells the goods in sizeable lots to other intermediaries down the line, such as semi-wholesalers, & retailers. The wholesalers do not sell to the ultimate consumer. Wholesalers add value by performing a number of vital marketing functions. Stock holdings & sub distribution are the main functions of wholesalers. They also perform functions like promotion, financing, collection of accounts receivable.

4) Semi Wholesalers : Semi wholesalers are intermediaries why buy products either from producers or wholesalers in bulk, break the bulk, & resell the goods to retailers. Semi wholesalers also perform the various wholesaling functions that are part of the distribution process. In some cases, they may also perform the retailing functions.

5) Retailer / Dealers : Retailers sell to the household / ultimate consumers. They are at the bottom of the distribution heirchy, working under wholesalers / stockiest / distributors / semi wholesalers. The retailers are also sometimes referred to as dealers. They operate is a relatively smaller territory or at a specific location.

various functions performed by marketing channels

The various functions performed by marketing channels are:-

(i) Facilitate selling by being physically close the customers.

(ii) Provide distributional efficiency by bridging the manufacturer with the user, efficiently & economically.

(iii) Break the bulk & cater to the tiny requirements of buyers.

(iv) Assemble products into assortments to meet buyer‘s needs, match segments of supply with segments of demand.

(v) Look after a part of physical distribution/ marketing logistics.

(vi) Share the financial burden of the principle, provide deposits, finance the stock till they are sold to the ultimate consumers

(vii) Provide salesmanship.

(viii) Provide pre sale & after sale service.

(ix) Assist sales promotion.

(x) Assist in introducing new products.

(xi) Assist in developing sales forecast/ sales plan for the territory.

(xii) Provide market intelligence & feedback.

(xiii) Maintain records

(xiv) Take care of liaison requirement.

(xv) Help diffuse innovation among consumers. Marketing

various objectives & components functions of physical distribution / marketing logistics

: Physical distribution is the process of delivering the product to the marketing channels & consumer. It encompasses the various activities involved in the physical flow of the product from the producers to the consumers. Marketing logistics is somewhat larger in scope compared to physical distribution. It covers physical distribution plus a part of the task of marketing channels. Marketing logistic bring in greater value addition in the delivery chain beyond transportation or distribution.

Objectives of Physical Distribution / Marketing Logistics :

1) Confers Place & Time Utility on Products : It is physical distribution that confers place utility & time utility to a product by making it available to the user at the right place & at the right time. Thereby it maximizes the chance to sell the product & strengthen the company‘s competitive position.

2) Where Production Locations & Markets are Distant Physical Distribution Becomes More Crucial : At some points, the point of production might be far away from the markets for the product. In such cases, the product has to be marketed over an extended territory, it has to be transported over long distances, then there physical distribution becomes crucial.

3) Helps Build Clientele : It is physical distribution that determines the customers service level to a large extent, as a result, it serves as a vital tool in building market for the product.

4) A Promising Area for Cost Reduction : Physical distribution is a fertile area for cost savings over the years in most businesses. Physical distribution costs have grown into a sizeable chunk of the total costs & now ranks second amongst all cost elements.

5) Ensures the physical flow of the product from the producer to the consumer. Without this flow, marketing cannot take place.

Component Functions of Physical Distribution / Marketing Logistics : The component functions of physical distribution are :-

Planning the overall physical distribution system

In plant warehousing

Field warehousing

Transportation

Receiving

Handling

Secondary transportation, secondary handling & sub distribution

Inventory management at each level of the chain

Order processing

Accounting / record keeping

Communication

The three major functions are :-

(a) Transportation

(b) Warehousing

(c) Inventory Management

(a) Transportation : Transportation management involves decision on :-

How much to move?

When to move?

Where to move?

By what mode or combination of modes to move?

Main Tasks in Transportation Management :

Assessment of the transportation requirement.

Choosing the mix of transport modes.

Deciding the routing.

Development of operational plans.

Implementation / review.

Control of transportation costs.

(b) Warehousing :

Role & Importance of Warehousing :

Like transportation, warehousing vests the products with time utility & place utility.

In the case of some commodities, warehousing is needed on a larger scale.

In some cases sub distribution realities necessitate extra storage.

Storage reduces the need for instant transportation, which is often difficult & costly.

Storage is a competitive advantage, as with better storage, better servicing of the channel & consumer is possible Storage also helps in balancing demand & supply & in stabilizing prices.

(c) Inventory Management : Inventory management is the third major component of physical distribution task. The major elements of inventory cost :-

Interests on capital tied up in the inventory

Warehouse rent

Staff salaries

Insurance

Rates & taxes

Stationary

Postage & communication charges

Administrative overheads.

Costs & handling, unloading & stocking

Loss due to damage & deterioration

Cost of order processing

Contemporary channel scenario in India

OR

What is the scene of physical scenario in Indian context

 The contemporary channel scenario in India involves :

Conventions whole sale-retail trade continue to dominate the scene, through formats like supermarkets, retail chains & shopping malls are making a mark.

Image of channels undergoes a change.

Profiles of distributors too undergo a change.

Trade margins escalate as costs of distribution keep growing.

Expectations of the distributors also change.

Distributors are becoming choosy.

IT greatly influences the way marketing channels operate.

Firms go in for different kinds of non traditional cannels arrangement.

a) Outsourcing of marketing logistics

b) Exclusive retailing

c) Exclusive dealers without franchising arrangements

d) Exclusive retailing through showrooms

Firms go in for non store retailing methods

a) Director selling / home selling

b) Network marketing

c) Consumer fairs

Firms go in for direct marketing

a) Catalogue marketing

b) Direct mail marketing

c) Tele marketing

d) Online marketing